The crude curve flips into contango, and storage economics change with it
Near-dated contracts now trade below later ones. That has consequences well beyond the headline price.
The front of the West Texas Intermediate futures curve moved into contango, meaning contracts for near delivery trade below contracts for later delivery, for the first time in eight months.
The shape of a futures curve carries more information than its level, and it is routinely ignored in general coverage.
What the two shapes mean
Backwardation, where near contracts trade above far ones, indicates a tight physical market. Buyers pay a premium for immediate delivery because they need the barrel now.
Contango indicates the opposite: ample near-term supply, with the market willing to pay more for a barrel later than for one today. It is the shape of a well-supplied or oversupplied market.
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